Income Protection Insurance
- Protecting your most valuable asset
The troubling statistical reality is that 1 in 6 Irish people will be out of work for > 6 months, at least once during their career. Everyone agrees on the importance of life insurance, however income protection insurance should be considered to be just as essential, especially when you consider that the average person is 4 times more likely to become disabled (rather than die) during their working years.
What Is Income Protection Insurance?
Income Protection Insurance is a form of disability or sickness insurance that helps you protect your most important asset – your income.
An Income Protection insurance policy is designed to provide you with a replacement income should you find yourself out of work and unable to earn due to illness, injury, accident or disability.
Sometimes known as ‘Permanent Health Insurance’ or ‘Salary Protection’, an Income Protection policy can be taken out if you are a PAYE employee or if you are self-employed (with more than 22 working hours per week).
How Does Income Protection Insurance Work?
- You can choose from a range of Income Protection Insurance options to create a policy that suits your individual circumstances.
- You choose the amount of your salary you wish to cover, up to a maximum of 75% (less the State Illness Benefit, if applicable).
- You decide the ‘deferral period’, also known as the waiting period i.e. after what time period you would like the plan to start paying out (after 13 weeks, 26 weeks or 52 weeks).
- You decide when you would like the plan to end (i.e. age at which the cover will cease, usually retirement age).
- If you find yourself out of work and unable to earn an income after your deferral period has passed, your Income Protection Insurance policy is designed to pay you a regular replacement income. This replacement income will be paid to you until you return to work or until the plan ends, based on the cessation age you have chosen (usually this is your expected retirement age).
|AN INCOME PROTECTION INSURANCE POLICY COVERS YOU IF:||AN INCOME PROTECTION INSURANCE POLICY DOES NOT COVER YOU IF:|
|√ If you are unable to work due to an injury||X Your sickness or injury is a result of you not following medical advice|
|√ If you are unable to work due to an illness||X Your sickness or injury is a result of a pre-existing medical condition|
|√ If you are unable to work due to an accident||X Your sickness or injury is a result of a criminal act, drug or alcohol abuse|
|√ If you are unable to work due to a disability||X Your sickness or injury is a result of you deliberately injuring or harming yourself|
Note: Each individual policy may have specific exclusions other than those outlined above. Please refer to your Income Protection Insurance policy for full conditions of cover.
Do I Need Income Protection Insurance?
An Income Protection Insurance policy is designed to help prevent financial worries should you no longer be able to earn an income. It provides you with peace of mind in the event that you become unable to work due to ill health, you will be provided with a replacement income.
You should consider taking out an Income Protection Insurance policy if you are:
- If you are self-employed and you find yourself out of work due to sickness or injury, you are not entitled to any illness benefit from the State.
- With Income Protection Insurance you can cover up to 75% of your average net profits and thereby receive a regular replacement income if you remain out of work.*
- If you are employed and have minimal or no entitlement to sick pay from your employer, you may be only entitled to the State Illness Benefit of €198 per week.
- With Income Protection Insurance you can cover up to 75% of your salary less the State Illness Benefit. You may receive a regular replacement income should you find yourself out of work.*
* Payments begin after your chosen deferred period
How Much Does Income Protection Insurance Cost?
The cost of an Income Protection Insurance policy varies from person to person and depends on a number of factors, including:
- The amount of cover you require.
- When you want the plan to start paying (the deferral/waiting period).
- When you want the plan to end (the age at which cover will cease).
- Whether you opt for a ‘Fixed Premium’ for the life of the policy or a ‘Reviewable Premium’.
- Your smoking status.
- Your age, health, occupation and lifestyle.
Note: you are entitled to claim tax relief on premiums paid to an income protection plan at your marginal rate of income tax (up to a maximum of 10% of total salary).
For further information on Income Protection Insurance, or to receive a competitive quote, email us